Centre restores 10% import duty on chemicals for lab use, subject to conditions

New Delhi: The Central Board of Indirect Taxes and Customs (CBIC) has restored a concessional 10% import duty on chemicals imported for lab use by modifying a duty hike announced in the Union budget for FY25 to prevent tax evasion, an official order showed.

The 10% duty will apply to genuine users of lab chemicals, subject to a declaration about the end use of the imported consignment. Importers that don’t comply with this condition will be ineligible for the concessional rate. The changes take effect from 1 August.

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The indirect tax authority also specifically excluded undenatured ethyl alcohol from the 10% duty as the authorities noticed that importers of alcohol were misusing this provision. Undenatured ethyl alcohol attracts 150% duty.

A tax official explained that most chemicals, whether organic, inorganic or miscellaneous, attract import duty of 2.5%, 5%, 7.5% or 10% under the Customs Tariff Act. To facilitate trade, a dedicated classification code had been created for chemicals imported in packages not exceeding 500 ml or 500 gm to be used solely as laboratory chemicals, with a duty of 10%.

However, some importers were found to be wrongly declaring undenatured ethyl alcohol as a lab chemical to circumvent the 150% duty. To curb this misuse, the basic customs duty on lab chemicals under this specific classification code was increased to 150% in the Union budget for FY25.

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“However, to address concerns of genuine users, the basic customs duty on lab chemicals under change in tariff heading 9802 (excluding undenatured ethyl alcohol of any alcoholic strength) for use in laboratories and for research and development purposes has been reduced to 10%,” the official said, citing the order. Importers making use of this facility should not sell or trade the imported consignment, and violating the conditions for the 10% duty will make importers ineligible for the concessional rate.

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